Auditor-General wants more scrutiny of government spending

Over the past eight years, the number of multi-year appropriations as a percentage of the total number of appropriations increased from 7 per cent to 19 per cent. Photo / Mark Mitchell

The Office of the Auditor-General (OAG) is ringing the alarm bells over falling accountability of government spending.

The watchdog is worried recent governments have been going overboard allocating funding to projects to be spent over a few years when they should be sticking to the default practice of allocating funding on an annual basis.

The OAG recognises envelopes of money can give agencies the flexibility required to complete big construction projects or emergency responses, for example, when it’s difficult to pinpoint exactly when the funds will be needed.

But it’s concerned governments have increasingly been using multi-year appropriations (MYAs) unnecessarily for business-as-usual tasks, such as providing ministers with advice.

The issue is it’s harder to track what’s being achieved with a wad of cash over four or five years, than it is to scrutinise the use of smaller sums allocated annually.

“The increase in MYAs risks lessening the level of Parliamentary control and scrutiny over the Government’s spending plans,” the OAG warned in a new report, which calls for a review of the use of MYAs.

The OAG noted that in Budget 2008, there were 20 MYAs. This number rose to 59 in 2015-16 (under National), before jumping to 167 in 2022-23 (under Labour).

Treasury guidelines say MYAs should be used sparingly for specific time-bound activities where total costs are well defined and where the timing of the spending between years is uncertain.

Nonetheless, the OAG found over the past eight years, the number of MYAs as a percentage of the total number of appropriations increased from 7 per cent to 19 per cent.

To make matters worse, the watchdog said the number of MYAs set up outside the regular annual Budget process increased four or five times over the past five years compared with the previous five years.

The Budget process provides more opportunities for scrutiny.

The OAG didn’t investigate the appropriateness of every MYA, but highlighted a $12.7b envelope allocated to Kāinga Ora – Homes and Communities (between Budgets 2022 and 2023) for a Crown Lending Facility.

It said there were insufficient performance measures attached to this funding, making it difficult for the Government to be held to account for what the spending achieves.

Furthermore, fewer than three minutes were dedicated to scrutinising the massive $12.7b appropriation during a select committee meeting of members of Parliament aimed at addressing money allocated outside of the Budget process.

The other MYAs the OAG identified as problematic were related to Arts, Culture and Heritage, Finance and Pacific Peoples.

It said these authorised spending on policy, financial and ministerial advice, which, in its view, don’t fit with the purpose of MYAs.

“In our view, decisions to use MYAs should not be made lightly, and MYAs should be authorised only when justified,” the OAG concluded.

“We consider it timely for government departments and the Treasury, as part of their Budget process, to review the use of MYAs and confirm that this mechanism for providing flexibility in public spending is being used appropriately.”

While the OAG’s findings won’t affect this year’s Budget, due to be released on May 30, it hopes it’ll influence the funding bids agencies submit to the Government, the advice the Treasury provides, and the decisions the Government ultimately makes.

Jenee Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.